Alcon Tops; Maintains Guidance - Analyst Blog

Alcon Inc. (ACL) reported first quarter earnings of $1.91 per share, easily beating the Zacks Consensus Estimate of $1.75 and 23.2% above the year-ago earnings of $1.55. Net earnings increased mainly due to strong revenues and an improved market environment.

Quarterly revenues increased 15.3% (including the impact of foreign exchange) to $1.72 billion. While strong contributions from advanced technology AcrySof intraocular lenses, continued gains in the glaucoma market and growth in consumer eye care helped boost US revenues by 10.3%, international revenues grew 19.2%.

Emerging markets grew 24% with BRIC (Brazil, Russia, India and China) reporting a growth of 41.3%.

We were pleased to see that all the revenue segments at Alcon put in a strong performance in the reported quarter. While pharmaceutical sales increased 16.3% to $728 million, surgical sales increased 14.7% to $772 million. Consumer sales grew 13.9% to $221 million.

Pharmaceutical revenues were driven by the strong performance of the glaucoma franchise which posted sales of $303 million, up 30%. Continued market penetration of Azarga outside the US, and strong sales of the Travatan family of products boosted the performance of the glaucoma franchise.

Strong performance of intraocular lenses (IOLs), especially Advanced Technology IOLs, helped drive surgical revenues during the quarter. Global sales of intraocular lenses rose 17.3% mainly due to market share gains of AcrySof IQ ReSTOR +3.0 lens and broader and more frequent use of AcrySof IQ Toric lens.

Alcon’s SG&A spend during the quarter increased 4.2% to $492 million. Meanwhile, R&D expenses increased 15.8% to $169 million as Alcon continues to work on strengthening its pipeline.

Alcon reiterated its guidance for 2010 and expects earnings in the range of $7.30 – $7.55 per share on organic sales growth in the mid-to-high single digit range. The US health care reform is expected to impact revenues by $20 million and earnings by 6 cents.

We currently have a Neutral recommendation on Alcon. We believe Alcon is well positioned to deliver sustainable sales and earnings growth, thanks to its global business presence, a commitment to develop innovative products, and an aging global population. The aging global population and the continued economic development in emerging markets should help drive demand for the company’s products. Alcon competes primarily with Allergan (AGN).